Richard B. Goodman - General Counsel Richard A. Horowitz - Chairman, President, and CEO Joseph A. Molino - COO and CFO

Andrew Shapiro - Lawndale Capital Management

Good day and welcome to the P&F Industries Incorporated 2014 Earnings Call. As a reminder today's call is being recorded. At this time I will turn the conference over to Richard Goodman. Please go ahead sir. Richard B. Goodman: Thank you, operator. Good morning, and welcome to the P&F Industries Fiscal Year 2014 Earnings Conference Call. With us today from management are Richard Horowitz, Chairman, President and Chief Executive Officer; and Joseph Molino, Chief Operating Officer and Chief Financial Officer. Before we get started, I'd like to remind you that any forward-looking statements discussed on today's call by our management, including those related to the company's future performance and outlook, are based upon the company's historical performance and current plans, estimates and expectations, which are subject to various risks and uncertainties, including, but not limited to the strength of the retail, industrial, automotive, housing, and other markets in which we operate; the impact of competition, product demand, supply chain pricing; our debt and debt service requirements and those other risks and uncertainties described in the reports and statements filed by the company with the Securities & Exchange Commission including, among others, as described in our most recent annual report on Form 10-K, our quarterly reports Form 10-Q, and our subsequent filings. These risks could cause the company's actual results for future periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the company. Forward-looking statements speak only as of the date on which they are made, and the company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. With that, I would now like to turn the call over to Richard Horowitz. Good morning, Richard. Richard A. Horowitz: Good morning, Rich. Thank you so much and good morning, everybody. Thank you all for joining us this morning on the call. I will begin today's call with a brief summary of the company's results of operations and earnings per share for the fiscal year 2014 and how it compared to fiscal 2013. As this earnings call precedes the release of our annual report filed on the Form 10-K I believe it will be helpful to briefly discuss our fourth quarter 2014 and how it compared to the same period last year. I will then ask Joe Molino to briefly review key cash flow information and provide an update on some key events affecting the company. After which, we will move to a Q&A session as always. However, before I begin I wish to remind you all once again that the purpose of this call is to discuss and review the company’s fiscal 2014 results. As such I kindly request that questions focused on our 2014 results only. Thank you for your cooperation. The company’s consolidated review for the three month period and fiscal year ended December 31, 2014 was $17,903,000 and 75,035,000 respectively compared to 15,398,000 and 76,066,000 million respectively for the same periods in 2013. I believe it will be helpful to shed some light on these changes by segment. With respect to our tools group, revenue during the fourth quarter of 2014 was 14,365,000 compared to 11,949,000 in the fourth quarter of 2013. The increase was driven primarily by the Exhaust Technologies and Universal Air Tools Company acquisitions that occurred during the third quarter of this past year. Revenues from these acquisitions are reported as automotive air tools within Florida Pneumatic Company. Hy-Tech's fourth quarter 2014 improved over the same period in 2013 by $568,000 due in part to the acquisition of essentially all of the operating of assets of Air Tools Service Company in August of 2014. This acquisition enhanced our Hy-Tech suite of products and we expect that it should improve Hy-Tech's overhead absorption going forward. Fiscal 2014 tools revenue was 56,114,000 compared to 55,574,000 in 2013. Here again the added revenue generated from these three acquisitions was partially offset by declines occurring in Florida Pneumatic retail customer base. Revenue for our hardware group which consists only of Nationwide Industries at this time was for the three and fiscal year numbers ended December 31, 2014 $3,538,000 and $18,921,000 respectively compared to $3,449,000 and $20,492,000 for the same periods in 2013. I want to point out that primarily the result of our decision in late 2013 to sell the kitchen and bath product line which had revenues of $2,331,000 in 2013, Nationwide's 2014 revenue declined $1,571,000 when compared to the prior year. However, the loss of this kitchen and bath revenue was partially offset with the continued growth in Nationwide's primary product line of fence and gate hardware. And with overall gross margin and lower operating expenses, Nationwide was able to generate improved operating margin compared to 2013. However, I wish to point out that Nationwide's other product lines primarily fence and gate hardware had a net increase of $760,000 when comparing fiscal 2014 to 2013 and lastly despite the decline in total revenue Nationwide's 2014 annual operating income exceeded the prior year. The improvement in the tools margin is primarily driven, I am sorry, our selling and G&A administrative expenses for the three month period and fiscal year ended December 31, 2014 was 5,843,000 and 23,064,000 respectively, compared to 4,411,000 and 22,238,000 respectively for the same periods in the prior year. Significant items impacting our 2014 SG&A was 764,000 of professional fees incurred and an increase of 545,000 in depreciation and amortization both due to the three acquisitions. And of course more payroll course due to the new employees acquired through these acquisitions. Primarily the result of the three acquisitions occurring in the third quarter of 2014, our fourth quarter 2014 total interest expense including amortization of debt financing cost, increase of $205,000 compared to $104,000 in the same period in 2013. For fiscal 2014 our total interest expense was $540,000 compared to $490,000 for fiscal 2013. Taking all the above into consideration, our income before income taxes for the three month period ended December 31, 2014 and for fiscal 2014 was 667,000 and 3,777,000 respectively compared to 926,000 and 4,604,000 for the same periods in the prior year. Our net income after taxes for the 2014 fiscal fourth quarter was $230,000. I wish to point out that during the fourth quarter of 2013 primarily as a result of a lapse of the statute of limitations on an uncertain tax position, our tax was only $7,000 which resulted in a P&F reporting income after taxes for the 2013 fiscal fourth quarter of 919,000. And lastly of note, primarily driven by the three acquisitions in our fourth quarter 2014 EBITDA improved $1,643,000, compared to $1,477,000 for the same period a year ago. Our basic and diluted earnings per share for the 2014 are $0.56 and $0.54, respectively compared to $0.87 and $0.83 respectively for the full year 2013. At this time I will ask Joe Molino to provide some insight into our cash flow. Joe. Joseph A. Molino: Thank you, Richard. Capital expenditures, during the fiscal 2014 were $1,072,000 compared to $693,000 in 2013. Significant noncash items affecting our cash flows during 2014 were net deferred income taxes of $1,458,000, depreciation and amortization of $1,551,000, amortization of other intangible assets of $718,000, amortization of debt issue cost of $94,000, and stock-based compensation expense of $220,000. Other significant components impacting our cash provided by operating activities of $8,716,000 or decreases in accounts receivable of $1,233,000 and $1,670,000 of inventory. With that, I'd like to turn the call back over to Richard. Richard? Richard A. Horowitz: Thank you, Joe. I mean there are a lot of numbers flying around in this report, my little brief report based upon basically three acquisitions, melting it in, trying to make some sense of it. So we are doing our best to try to explain it to you. I apologize for the complicated numbers but I would like to also acknowledge all of our employees and management for doing such an outstanding job during these continued sluggish economic times, and of course with the three acquisitions blending into our companies. All of us had believed in our companies and continued to do so. And with hard work P&F will continue to improve. That's the end of our report today and we would be happy to answer any questions anybody may have.

[Operator Instructions]. We will go first to Andrew Shapiro.

Yes, hi, can you hear me okay. I am calling in from the road. Richard A. Horowitz: Yeah, we can hear you fine Andrew, thank you.

Okay, so I wanted to do some follow-ups and asking about these three acquisitions if I could. From what you said on the prior call which was November, and here we are at the end of March, just so you can give us I guess an update on the three and how the integration of these businesses has gone or is going. I guess the most current acquisition and the one that is implied in your press release issued today, the end of March is I am trying to get a context of the time horizon if you are speaking of present day March or at the end of December, because you speak after the ATSCO, is that how you describe it, the ATSCO integration is "continuing" and then it had negatively impacted ATP and Hy-Tech's operating results. Is this as of the end March and this is still going on or this was as of the end of December and impacting just fourth quarter? Richard A. Horowitz: I’ll let Joe get into the specifics of it but we bought that company sometime in the late August I believe and it was different than the other companies because there we brought an ongoing factory. So we managed to get our arms around it and get the factory working well and then by the end of January or early February we had totally closed that factory down and merged it into our factory in Cranberry. So as of now there is no more mentor facility, everything has been merged into our place but as you can imagine, I would imagine you can imagine moving machinery and inventory and dyes and tools and all those things is, it’s not just flipping a switch. It takes some time, and we are making very good progress. But we are not done with it yet. But the places are closed and we are all done. Joe, you can add to that if you want. Joseph A. Molino: Just to answer your question specifically Andrew, the comment related to Q4 only. I wasn’t addressing Q1.

Okay, so then here we are at the end of March, what has been done this quarter and what is left to be done that might not be reflected in the March results that you are going to announce to us in probably a little over a month from now? Richard A. Horowitz: Yes, well as I said to you what we’ve done since the year end, we’ve closed the factory, moved everything in, and we are in the midst of consolidating and making everything -- transition smoothly into our new place. And that’s not something that happens overnight. So we are in the middle of that. I would imagine we are in the midst of it, we are not done with it. It’s a very big process and it’s been there about I guess 45 days now or 60 days or something approaching that. And it’s an ongoing thing. I don’t know what question you are really asking but we do expect that certainly by the end of the second quarter we expect that everything should be, I’ll say business as usual but it’s the new usual, if that answers your question.

What I am trying to get at is when can I start assuming your run rate is indeed your run rate without a non-recurring headwinds, it sounds like the March quarter that you report will have at least rent in the now closed facility through January, when did rent stop in Mentor. Richard A. Horowitz: Rent did not stop, rent is continuing for I believe another perhaps three months or four months or… Joseph A. Molino: May goes –- rent goes through the middle of May, but it’s not a relatively large number. Richard A. Horowitz: It’s a small relative number but rent goes to the middle of May and but that’s the least of it. But everything, the absorption is -- we are starting to see absorption benefits now but not to the full extent that we will see by the end of Q2 going into Q3 really.

Right, well that’s what I am trying to get but that’s what the nature of the question is to understand the real appropriate run rate now… Richard A. Horowitz: I apologize go ahead Andrew I am sorry.

You -- were saying what -- you would say not until – Joseph A. Molino: I would say there will be a little improvement in the first quarter, more improvement in the second quarter, and by the third quarter we should be really in a good state in that regard.

Okay, regarding ATSCO biggest customers you implied or mentioned on the last conference call again in November, so it is four months of visibility here that you expected the biggest customers to remain with P&F and inside of Hy-Tech, has that been your experience or is that still to be decided? Richard A. Horowitz: Yes, that’s been our experience. Anything of course can happen at any time but we don’t expect, we have not seen what we expect any losses from our bigger customers or from any customers really.

Okay, and then finalizing my questions on ATSCO and I’ll back out in the question queue, I do have many more questions of course but regarding your integration and the benefits you perceived and think you will be engaging in with respect to ATSCO, is it solely getting the product line and start manufacturing an overhead absorption inside of Hy-Tech's or are there other cost benefits that you anticipated and are you seeing signs of that, such as adding brands, expanding brands, cross selling amongst the customer base of the various products, and other consolidation or benefits in the distribution channels, etc? Richard A. Horowitz: Yes, obviously in addition to just the overhead absorption we felt there were opportunities in our level of productivity in certain processes that we can do in house that they were outsourcing. So, there is those and then yes, the product lines themselves are extremely complimentary, where they tended to be stronger, we didn’t have much of a presence and we are absolutely working on the cross selling of those products across the entire customer base now. But that is going to take a little longer. Actually the manufacturing stuff is a little more automatic so to speak. I mean you got to get through it but it is a little more automatic.

Okay, and the non-core equipment and asset disposals, you didn’t think there would be a lot but you thought there would be some, did you get those in Q4, is it the current Q1 or the sales of those items are still ahead? Richard A. Horowitz: Well, we did -- we think we did a fairly thorough job of anticipating the ultimate resolution of where the equipment would go and the cost incurred, and what we could get for the stuff we were going to dispose off. So, frankly I don’t think the impact of that in Q4 or going forward is going to be particularly material. It is already baked into the numbers.

Alright, I will back out. Richard A. Horowitz: You could keep asking questions because there is nobody else in the queue at this time.

Okay, fine. So you just let me know. So you said on prior calls, of course only the ATSCO integration remained and the other items for Exhaust and Universal were done and this was in November for the quarter ended September. During the Q4, were there any non-recurring inefficiencies or redundancies or costs from the first two acquisitions that impacted the reported results you just reported? Richard A. Horowitz: Yes, again I will let Joe answer that question, but I don’t believe any, we are really on AIRCAT but at UAT we had the principles with Air to I believe the end January. So we had that recurring expense which is no longer an expense in the Q1 and going forward, anything else Joe. Joseph A. Molino: I mean obviously all the acquisition related costs are still in the numbers through Q4. In addition to that, even though the physical integration of the first two deals was pretty much a non-event, one was just simply moving everything over a long weekend and the other was acquiring something that stayed in place. The integration of the marketing programs and the benefits to be seen from the combination are going to happen over some period of time. It is a continuum, it didn’t all happen on one day.

Right, in fact you discussed an initial favorable response at the Trade Show that occurred the week of the last quarterly call, can you four months later expand on your take away from that show and any other subsequent, are you receiving orders from these events, and traction in the marketplace with your expanded product lines? Richard A. Horowitz: Yes, we are -- as far as I mean, Joe again you can add on to this, we are extremely pleased with the acceptance and the rate of business from the AIRCAT Exhaust Technologies acquisition. And the UAT is going as planned but we are doing very well on both these acquisitions, more specifically the Exhaust Technologies one which is more sort of mean potatoes.

And with the Universal, you mentioned the principles and their salaries existing through the fourth quarter and I guess somewhat into January, the payments to those principles, that is part of your SG&A line, so that going forward SG&A would be a little bit more under control? Richard A. Horowitz: It will be less. I am not sure I would use the word not under control. I think it is under control, was under control but yes those costs will drop off beginning February, February 1st. Richard A. Horowitz: But again, then dramatic Andrew I don’t think there big, big numbers are going to make such a difference but SG&A is not out of control in any way, shape or form. Remember that we had three quarters of million dollars in expenses put in there that was buying the three companies. I mean so -- this is one thing but yes, obviously they will be less, obviously.

I am just looking at Q4, I understand the other expenses that went through and we reported for the nine months ended Q3 but I am just looking now at Q4 and the SG&A and SG&A to revenue line items for the operating leverage that we would hope to see and expect to see from these acquisitions that may not yet be present? Richard A. Horowitz: Yes, and I think you get a little taste of what it is based upon the EBITDA for Q4 when you just break it out little bit that was better than last year’s Q4. But you’ll get just a very light sense of what’s been occurring.

Oh no, I am certainly I am seeing the EBITDA benefit already from the overhead absorption and the improvement of gross margin and gross profit coming from that. But I am also hopeful in expecting that we would see a bit more of the operating leverage and benefit to EBITDA and EBITDA margin that should come from the SG&A as a percent of sales line item as well? Richard A. Horowitz: Absolutely.

Okay, so you expect the same then? Richard A. Horowitz: We expect the same, yes.

Yes, okay. Now are your sales forces rolling at full steam selling these new products or and have you made any major sales or added new customers for these businesses as a result of the acquisitions yet? Richard A. Horowitz: Again it’s a process but it’s better than it was and its continuing to improve. I mean I wouldn’t say we’re on all cylinders yet in any of our divisions but as every ticking day that goes by we get much closer to that. Joseph A. Molino: I always say yes to both. We’ve added new customers and at this point all of our sales people have the full suite of products available to them that anyway the products that are available out of development. I mean obviously we have got new products that we are coming on board with all the time but anything that’s -- can be made by us can be sold by any of our groups.

Right, and you mentioned before the desire and hope that down the road, I don’t know four months down the road or what you can at least provide time expectations that some of the processes and technologies that came out of the Exhaust acquisition you were looking forward to carrying them over and bringing them into the rest of the P&F to the line. They have greater visibility on the time horizon and the types of carryover technologies to be worked into your other tools? Richard A. Horowitz: That’s going to take a little while. I mean we are talking about it. It’s a full on engineering program. Primarily the place we’d hope to use that was at Hy-Tech and frankly we are still very busy on the integration but it is in process. It is going to take a little bit of time to see where it makes the most sense to call the customer base and enquire as to what people are looking for. But it is absolutely something that’s still going to be done but some other priorities are... Joseph A. Molino: Yeah I mean engineering takes a while clearly so, we are working on it. Richard A. Horowitz: Absolutely but is it working on it. I don’t know if I can give you a reasonable expectation yet but probably in the latter half of the year that’s almost got done. And having said that there are new products being introduced into the Exhaust Technology AIRCAT line as we speak. I am going to say something over 10 new products right now and it is a little trying to blend in so it’s a process but it’ll improve again. It will improve more and more as the second half goes.

Okay and can you discern or break out for us someone else asked on last quarter’s call? Richard A. Horowitz: The incremental revenues in Q4 from any or all of the three acquired businesses that were not in the company in the prior year, I know some of its going to start to blend together but there is still probably is some revenue stream that certainly the UK acquisition is probably still pretty discernible. And I don’t know if the other two businesses, the incremental Q4 revenues not there in the prior year are discernible. Joseph A. Molino: Well, it is a little difficult to say and if you look at the automotive segment, that grew by 5.4 million and it is a little -- we scrambled the egg a bit frankly as we have deemphasized old automotive products and re -- and started to emphasize AIRCAT products but the bulk of that $5.4 million change in automotive is certainly as a result of the impact of the acquisition. But I can't tell you it is solely the result of the acquisition because again it is a little bit of apples and oranges but I think it at least gives you a flavor for it. With regards to UAT, it is just not something we are going to address on the call but as time goes on we will be disclosing European revenue, going forward and you will be able to get a pretty clear sense of what is coming out of sales over there. But we are not quite there yet.

Alright, and with respect to the other more color organic of preexisting businesses, are there any visibility on metrics that leads you to believe that your sales declines in Sears has now bottomed and I don’t know if there is even the thought of it improving but it has -- do you feel that things have bottomed and what the -- what reasons give you that belief? Joseph A. Molino: I would say to be frank that I am comfortable at least for now that Sears has reached a fairly steady state. Now, I don’t know what the future holds for Sears in the long run but I am not uncomfortable saying that we maybe at the -- we may have bottomed out at least for now on Sears, whatever that means.

Okay, and what's your current experience and visibility with respect to your Home Depot, are there incremental SKUs to roll out, additional seasonal promotions of size that will be causing one or more quarters to have a spike? Richard A. Horowitz: You know, Home Depot is going -- when you take out the initial stocking order where they filled the whole channel and all that stuff, if you go from that they had -- they were flat year-to-year and we are projecting them to be flat to slightly up this year. But it was very good numbers. And of course we talk all the time about promotions with them and right now they are talking about one with us. It hasn’t happened yet but they are talking to us about it. They are talking about various things with us but nothing has really quite happened yet of significance but we expect, when you are in the game you are there for the swings. So, we have a very, very good relationship with them. They are very satisfied with us as a vendor, and they come to us with opportunities as they arise. But I can't tell you with any certainty what they are quite yet for this year but I would think that there would probably be something. How significant it is I don’t know yet. They would only be the ones to know. But we are at a very positive stream with them I could tell you that.

And as long as you are with them, the idea of getting into Lowes is probably not a prospect? Richard A. Horowitz: Not probably, definitely.

Okay, and with Sears you are doing a bunch of the Craftsman and Sears is looking at ideas and ways in which the Craftsman brand might be widened in terms of its distribution and all that, is there either from the Home Depot side with respect they are competing their own brands and Sears obviously has some competition, is there any chance that Home Depot would ever be retailing and marketing and distributing and selling the Craftsman brand tools? Richard A. Horowitz: I mean anything is possible. I mean, Sears has made a strategic decision that they are going out to other people now with the Craftsman brand and selling it to them and of course we are the beneficiary of that when it does occur. And I don’t know if we would have inner knowledge of what their strategic plans are. I think, I mean if I were just as a layman, I would say Home Depot is very happy with their Husky brand and they are working hard to make that happen. But it is all conjecture on our part.

Okay, now also four months now after the last call, have you experienced a bottoming and maybe now improvement in the catalogue pages for P&F products that had the main negative headwind in the quarter and year-to-date ended September? Richard A. Horowitz: Again we’re pretty much going as expected at this point. I don’t think it’s quite as I mean, we say it in the press releases and every other thing. But, and every other printing but it’s not as dramatic or a factor as you may think or people maybe led to believe from our wording. It is down a little bit, it’s not dramatically down in any sense but I mean it basically still showing nothing deteriorating any more than that, if that’s what you are asking.

Okay, well you know all we have is to go of this the words you provide us so maybe... Richard A. Horowitz: Yes, of course we are giving you what we feel, it’s nothing to be terribly concerned about, that’s what I am trying to say to you.

Alright, now are you at a point it sounds like you got much of the acquisitions absorbed, you do got more work to do on Hy-Tech and ATSCO, what are your plans for future acquisitions, are you more actively now four months later in the market for accretive acquisitions than you were when we spoke to you in November or do you anticipate taking a break a little while longer to still adjust your new business dynamics? Richard A. Horowitz: I would say and we had a discussion about it at the Board at our last meeting a couple of weeks ago. We are always open and looking. We are always looking because we want to grow the business so we are always looking. But we have to be very mindful of just throwing more things into our company’s like in Hy-Tech right now we wouldn’t dream of putting another acquisition in there because they are still very, very busy with absorbing what they got. But if something good comes along for other two companies the answer would be yes. We would buy it if anything came along and we are always looking.

Okay and regarding the Hy-Tech obviously it is integration and absorption but once that’s all done what would you feel, how would you describe the operating capacity and its ability to take on another acquisition because they are still underutilized overhead. Richard A. Horowitz: Well, it depends on where we end up after the acquisition. I think there are opportunities within the customer base we inherited from ATSCO. So even if we are -- when we are successful in getting through the integration I think we would look to those opportunities first. So I wouldn’t necessarily call them an acquisition but if that wasn’t enough growth then I think we probably look for an opportunity to grow. We are only on one shift so it goes without saying that an addition of a shift could certainly improve revenue a lot or capacity a lot. We’ve got a certain a amount of capacity with the equipment we’ve got, the employees we’ve got, and the shifts we’ve got, and if you change any of those variables which we could and well to the extent we have those opportunities you increase capacity again. So we are no where theoretical maximum capacity.

Okay, in order to ensure that of course the shareholders benefit equally if not more from the upside, from the company going forward and all that. These acquisitions came at the end of and the integration and visibility came at the end of the fiscal year right at the time a new employment senior employment contractors negotiated. Were the performance targets on the most recent contract and for the coming year, were those rejiggered and adjusted to reflect appropriate benchmarks on the newly acquired businesses and a larger size of the company? Richard A. Horowitz: I don’t know if I understand the question but if you are asking if the metrics have changed for the 2015 bonus companywide based upon the fact that we got new businesses, is that the question?

Yes, I mean the performance target gets set. Now we’ve acquired a bunch of new business, if there is anything in the performance target side of the revenue obviously that has to get an adjustment for the acquired businesses and similarly for the cash flows because the goal or performance targeting is to incentivize above and beyond type of performance behavior and not just so we made an acquisition using a bunch of the company's debt and capital and now all these performance targets get hit based on their old levels? Richard A. Horowitz: No, no, I think what we have -- we have a compensation consultant of course. The compensation committee has a compensation consultant and the metrics or however you want to say it for 2015 are obviously different than they were in 2014 because you have three new companies. It is a very -- it is a difference, it is a sizeable difference.

So, the point is that they have been reset with these companies in line. Richard A. Horowitz: A 100%. Joseph A. Molino: And I would just also comment, putting that aside, just because we have the company's resources at our disposal doesn’t mean that it is easy to go out and find companies to buy that makes sense, that you can convince to sell to you at a reasonable price and you can integrate them. That in itself is worth something to the corporation. But, I don’t want to make light of how much work when involved into getting that done and how successful I think we were at accomplishing that. Having said that, everything was reset as a result of having those three acquired.

Right, and Joe I don’t dispute that it is a difficult process but I also think the proof is in the pudding on whether or not an acquisition was worth the effort and was good. The proof is in the pudding usually multiple years down the road rather than in the first year. So, yes, I mean would love to reward one for making an acquisition but only after we know that it is was a good one. Richard A. Horowitz: 100%. I guess the Board agrees -- the Board agrees with you Andrew.

Okay, good. Alright and then can you give you us some feel now for the customer concentration of your various business lines and how dependent they are in a small number of clients. Obviously Home Depot has become a large customer that certainly reduced the dependence that was existing on Sears and then with all these automotive industry acquisitions, arguably reduces the dependence on Home Depot a bit, so can you give us a handle on some of that. Obviously the 10-K is not out but would otherwise I think require some of that disclosure, so can you give us and tell in rough what's in that K for all of us? Joseph A. Molino: Actually I don’t have the exact figures in front of me. Certainly the dependence has gone down from 2013 to 2014 and I would expect it will go down from 2014 to 2015 for Depot and Sears which are the only two we talk about really, not by name but what we discuss in the filings. But yes, that will continue to decrease I think fairly significantly for 2015.

I don’t have that. Richard A. Horowitz: I don’t have that.

Okay, you know I am glad to come out of the question queue if you got anyone right, in order to… Richard A. Horowitz: No, there is nobody else. There is nobody else there.

Alright, so now what is the current status of your lines of credit in terms of maturity days, has any adjustments been made in light of the obviously incremental acquisitions of working capital needs and opportunities, of course we are going against cash flows as well. And when is the timing for getting those things rejiggered for a bigger and broader business? Joseph A. Molino: Well, right now the current deal goes through 2017, I believe the fall of 2017. We have I think at the peak of the summer or the peak of the borrowing, we were borrowing in total something like $26 million or $27 million by year end. I think that was down to $21 million or $22 million and we certainly expect to have excellent cash flow in 2015. So, there isn’t any real need to do much with that. I think, just the processing of the cash will allow us greater opportunity as this year goes forward for other acquisitions. Even if we had, $20 million worth of acquisitions in front of us for 2015, I am not sure we can get all that integrated this year. So, I think the level of capacity we have got is probably fairly consistent with our operational opportunity at the moment. So, we are not doing anything with what's there for now but I think it is somewhat dependent on what our opportunities are. I think towards the end of the year and the beginning of next year if we see a big opportunity we could perhaps do something. But, on our revolver which is now $22 million revolver, we have got about something like 5 million or 7 million in availability. We had a term note along with the acquisitions that won’t get paid off early in 2015. That was a $3 million term note so that will just come out of the revolver. But once we get through the peak borrowing period of the May-June timeframe, not that we won’t have any availability up until then we will but, in the back half of the year we have a lot of availability again. And we are well, well within all of our bank covenants calculations. We are not even close to being out of compliance. Richard A. Horowitz: And I would describe our bank relationship as better than good, much better than good. Joseph A. Molino: And we have so many opportunities from other lenders at this point. Should we have an interest, we can expand beyond what we’ve got. We don’t have an interest right now but if I can imagine given our.

Well banks love to offer you money but you don’t need it. They only offer money when you don’t need it. Joseph A. Molino: Yes exactly.

So let’s assume you don’t have an attractively value acquisitions are not available and the company stock price has not moved from where we are at which we think it ought to but it hasn’t moved and you now have your cash flow projections that you have paying down obviously a lot of debt. At what point because I’ll acknowledge that today might not be the day I would ask for it or I am asking to being considered but at what point, is it the end of the third quarter your peak season basically nine months for the year of paying down your debt levels. At what point in your projections does your debt to equity level get back down to a very low level that the concept of further buybacks from shares or instituting a small but stable dividend becomes a discussion point for the Board again? Richard A. Horowitz: We have discussions about that at every Board Meeting Andrew with or without your prodding because it’s a legitimate question. And we had it in our meaning two weeks ago, we had a lengthy discussion about it with the Board again. And there are so many variables still at this time, I don’t know if I could really give you a third quarter or fourth quarter but we look at every quarter and it’s a fluid situation and if come to the end of the year we are flushing cash and we don’t have any acquisitions. It is something that we’d have to consider seriously. If we didn’t make the acquisitions where we would have considered very seriously last year. So I would say a third quarter, fourth quarter perhaps but again so many variables have to come to fruition. We have to see how it goes but that would be our time to get serious.

Right, I’ve been on board and I am sure I could echo probably what went on in the board room. Maybe one of the -- the issues you are going to tackle there are what’s our cushion and our coverage and our debt to equity ratios and obviously everyone came to the conclusion as I would that this quarter isn’t necessarily the right quarter. But in the discussion there becomes a like a range of either coverage or debt to equity percentages, leverage ratios where this becomes a more realistic alternative or a realistic choice vis-à-vis acquisition opportunities and which one has to evaluate whether they are there or not. Can you give some guidance as to that kind of range of leverage ratio where it becomes a more meaningful discussion in the Boardroom. Richard A. Horowitz: I really can’t, Andrew I really can't say -- give you specifics about that. I can only tell you that it is something we discuss at every Board Meeting and its certainly something we think about and talk about with or without your prodding. But please do continue to prod us because I don’t want you to think that we are ignoring it. But we talk about it and we’ll see how it continues. We have to see how our year plays out. If it plays out as planned, if it does better than planned, if it’s less than -- we don’t have crystal ball but it’s certainly a viable conversation as later in the year approaches, that's what I can say.

Since it is year-end and it is certainly much more part of the audit and all that, Joe can you update us what’s left to the federal NOLs and is there any state NOLs outside of Virginia where you have those captured NOLs? Joseph A. Molino: It is under $1 million on the Federal NOLs at this point. It should be gone by… [Multiple Speakers] Richard A. Horowitz: I am sorry, say it again.

You were saying it should be gone by when? Richard A. Horowitz: Before the year is up those NOLs will be gone, the Federal NOLs.

And then the state NOLs there is nothing outside of the captive ones in Virginia? Richard A. Horowitz: Correct. Joseph A. Molino: Not of any –

Are you looking for acquisitions in Virginia to potentially take advantage of them? Joseph A. Molino: That seems like the backwards way to go about an acquisitions program but if there is something in Virginia that makes sense we’ll take a look at it. Richard A. Horowitz: It would be a pickup. It would make it a better fit if we were lucky enough to get one right.

If you did acquire something in Virginia you could use them, right there is nothing else that blocks them in? Richard A. Horowitz: To my knowledge they are fully usable if we’ve got something in Virginia, yes. There is nothing that can get in the way.

It’s not like they are captive in a subsidiary that because of the past restructuring bankruptcy events you can’t use a subsidiary for example? Richard A. Horowitz: Not to my knowledge but obviously I don’t know what the tax rate is in the State of Virginia but I can’t imagine an acquisition of a size we could do where this would really drive the value by a great deal but it is something certainly.

Alright, I don’t think I have any further questions but one which is that okay, we are a bigger company, bigger revenues appreciate you are having a quarterly conference call, is there any thought from management and/or the Board about expanding the resources involved in your Investor Relations activity so that I am not the lone inquisitor on the call. In other words that you can get some additional interest in the investment community that would of course address what I think we both concur is a very low market valuation model that’s on our company’s operating results which in effect artificially inflate this company’s cost of capital? Richard A. Horowitz: Of course the capital is extremely low.

Your cost of capital at a 5PE [ph] your cost of capital is extremely high, in a 10PE the cost of capital would be a lot lower because the cost of capital includes the cost of what your equity is trading at? Joseph A. Molino: Yes, I mean for our cost of capital really to be effective we’d have to be a fair amount larger than we our or multiple of the size we are. I don’t know what we can do about that in the short run.

Are you seeing Investor Relations and Investor Communication efforts things that would tell the P&F story to above and beyond the quarterly press release, and the quarterly conference call that would mean various micro cap conferences or investor relations firm with non deal road shows to various micro cap investment managers is not worth the resources? Joseph A. Molino: Andrew, back when we were even larger than we are now we did all that and we tried for years, many years and we were still too small. So I am not sure it’s going to be -– I am not sure why this is any different in 2015 than it was in 2004.

Well, first off its 11 years and the bifurcation or trifurcation of the public markets here in asset classes have changed. There is a whole different universe of methodologies of getting the word out and communicating one's investment story. I am not talking about the idea you going to get Morgan Stanley over to cover the company but there is a universe in the micro cap sector that does exist and investor relations by companies in the micro cap sector can and does have a payoff for others. So I am not sure your experience 11 years ago should be the end of be all indicator of whether or not efforts in today's environment are worthwhile if you properly place those resources and select your various targets, pick your spots for some -- Joseph A. Molino: We will definitely. I hear what you are saying, we will definitely visit it -- we will revisit it for sure. We will definitely do that. I don’t know, if it will have a different result, we will definitely examine it again, it has been a while.

Right, I am not saying Lippert/Heilshorn, they maybe too large gap for your but if you get some inputs, for the Board to get some input from some investor relations professionals about where, when, and if some resource dollars would be worthwhile and create an incremental following and you have got a few multiple points on evaluation multiple, that would be beneficial I believe to all. Your stock is certainly not a currency available to you in any acquisition and that would allow you to make bigger deals in addition to your credit lines and cash availability if you had a better multiple? Joseph A. Molino: I hear you. I hear you and we will get to it, I promise you.

Great, thanks. Richard A. Horowitz: Thank you for questions and thank you for your time Andrew. Operator?

Yes, ladies and gentlemen thank you for your participation. This will conclude today's conference.